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High Court limits scope of punitives


WASHINGTON--The U.S. Supreme Court decision last week to overturn a $79.5 million punitive damages award against a tobacco company may not represent a total victory for businesses, say some tort reform advocates.

That's because the 5-4 majority in Philip Morris USA vs. Mayola Williams held that juries can take into account evidence of harm allegedly inflicted by a defendant on people other than the named plaintiffs in determining the "reprehensibility" of the defendant's misconduct.

However, wrote Associate Justice Stephen Breyer for the majority, "a jury may not go further" and use punitive damages to punish a defendant directly for harm to others not named in the suit. "Given the risks of is constitutionally important for a court to provide assurance that a jury will ask the right question," wrote Justice Breyer. The risks of arbitrariness, inadequate notice and imposing one state's policies on other states made it "particularly important" that states avoid a procedure "that unnecessarily deprives juries of proper legal guidance," he wrote for the majority.

The case involved a suit brought against Philip Morris by Mrs. Williams, the widow of a longtime smoker. A jury awarded Mrs. Williams $821,000 in compensatory damages and $79.5 million in punitive damages after her attorney asked jurors to think about how many other people had been harmed by cigarette smoking in Oregon over 40 years. Punitive damages that were nearly 100 times the amount awarded in compensatory damages appeared to violate an earlier ruling by the Supreme Court that punitive damage awards in excess of single-digit multiples of the underlying compensatory damages were generally unacceptable. But the Oregon Supreme Court disagreed, and reinstated the $79.5 million in punitive damages.

Philip Morris appealed to the U.S. Supreme Court, asking the justices to decide whether the trial court should have told jurors they could not punish the defendant for injury to people not before the court and whether the nearly 100-to-1 punitive/compensatory ratio was "grossly excessive."

The nation's highest court returned the case to the Oregon Supreme Court. In doing so, it declined to answer the second question and said the Oregon Supreme Court's actions could result in a new trial or change in the amount of punitive damages awarded.

"I think that the bottom line is there's going to be more litigation. This is moderately good news for potential tort defendants, with the emphasis on moderately," said Michael Krauss, a tort law expert and law professor at the George Mason University School of Law in Arlington, Va. "The moderately good news is that court says explicitly for the first time that the amount of punitive awards can only be a function of the harm done to the plaintiff."

"That's new--they've never said that before. That is a pro-defendant statement," Mr. Krauss said.

But "they did qualify this--they reiterated that harm done to other than the plaintiffs is admissible for the purpose of deciding whether punitives should be awarded, not for the purpose of deciding how much should be awarded," he said.

"This distinction is going to be a very difficult one to make," said Victor Schwartz, general counsel of the American Tort Reform Assn. in Washington. "Once the bell rings, it's hard not to hear it. It could muddy the waters because it's a distinction in the reality of the jury world that may not make an actual difference."

"How do we know that (jurors have) disregarded it?" asked Mr. Krauss. "How do we know that they've done their job correctly?"

The attorney who argued Mrs. Williams' case before the high court said the court rendered "a very narrow decision that will be quickly forgotten."

The court said "you can consider harm to others for purposes of reprehensibility, but not for punishment," said Robert S. Peck, president of the Center for Constitutional Litigation P.C. in Washington. "That's an undisputed proposition. We said as much in our brief; the Oregon Supreme Court said the same thing. No court has really held otherwise.

"The court was basically slaying dragons that don't exist. As a practical matter, the only thing this means is that you can't multiply the harm by the number of presumed victims," Mr. Peck said.

But other observers disagreed.

"The bottom line is that this decision should change the way punitive damage cases get tried," said Lori Nugent, partner in Philadelphia-based Cozen O'Connor P.C.'s Chicago office. "First, there can be no punishment based on alleged injuries to other parties. Second, speculation about purported injuries to nonparties should be precluded under this decision; evidence will be required. No more will plaintiffs' counsel be permitted to exhort the jury to send a message that defendants' conduct that purportedly caused injury to entire classes of people must be punished."

Robin Conrad, senior vp at the National Chamber Center Inc. in Washington, called the decision "a short decision with long legs. This issue of punishing for harm to nonparties is a big concern to a number of industries."

"It's really not fair for defendants to litigate these cases with their hands behind their back, to allow the plaintiffs to have all of the benefits of class action without allowing the defendants to have the defenses of class action."

Ms. Conrad said that "really good jury instructions" could help prevent jurors from using information about harm to nonparties permitted in determining reprehensibility of conduct when determining punitive damages. Courts could also exclude "the evidence if it's going to be used for the wrong purposes," she said.

Philip Morris USA vs. Mayola Williams. U.S. Supreme Court. No. 05-1256. Decided Feb. 20, 2007.